Separatism is on the rise in Europe. This column argues that, while the Eurozone Crisis is certainly reinforcing regional tensions, the underlying causes are globalisation and the deepening of the European project. Independence campaigners want access to the larger European market, while unfettering their regions from the centralised control of national governments. Renegotiating the terms of the relationship between national and regional governments is preferable to resorting to political threats or the use of force.

In the debate over Scottish independence, the question of how the UK’s assets and sovereign debt would be divided has received insufficient attention. This column argues that the size of Scotland’s debt obligations would be crucial to its optimal choice of currency. Under plausible assumptions, fiscal tightening would be required to return Scottish debt to sustainable levels, and a self-fulfilling rise in borrowing costs might tempt Scotland to leave the sterling currency union. A debt-for-oil swap might be mutually beneficial for a newly independent Scotland and the continuing UK.

Economists and policymakers are increasingly concerned that central-bank independence is being threatened. This column argues that central banks are not losing their independence, but that their room for manoeuvre is being eroded by a lack of structural reforms and fiscal adjustment. The financial crisis has caused mission creep, pushing central banks well beyond their comfort zones and as the time comes to pull back, independent monetary policy could still be powerless against fiscal dominance.